Is Groupon worth $5 billion or $25 billion?

It's been rumoured by inside sources that Groupon is preparing for an initial public offering by the end of this year - in fact, as soon as this spring. The valuation was initially pegged at around $15 billion, but Bloomberg recently reported that its valuation could run as high as $25 billion - which would trump Google's $23 billion IPO and make history with a pace of growth unprecedented.

Quoth Mashable:

Groupon raised eyebrows when it turned down a $6 billion acquisition offer from Google in December 2010. The startup then went on to raise $950 million in a Series D round — including funding from Starbucks CEO Howard Schultz’s investment firm — with an estimated post-money valuation as high as $7.8 billion.

We do know that Groupon generated $760 million in sales in 2010, according to a leaked internal memo from CEO Andrew Mason in February. Plus, rumors at the time of the Google acquisition talks had it that the company’s annual revenue run rate was $2 billion.

But the numbers don't add up for IAC founder and chairman Bob Diller, who at South by Southwest said that Groupon's valuation is "mathematically insane," suggesting the potential for a tech bubble as experienced during the 2000 dot-com crash.

Quoth CNN:

The bubble question is much-buzzed-about at SXSW, which is a a magnet for digital movers and shakers. Some of its past breakout stars -- like Twitter -- have drawn funding rounds or acquisitions offers that give them eye-popping valuations. Asked if there's a new bubble forming, Diller answered: "Well, we're puffing it up pretty nicely."

In the end, a company is worth what investors are willing to pay for pieces of it - and therefore value it at. So until an IPO occurs, and real money flows, Groupon is worth as much as can be proven so far, which is somewhere between Google's $6 billion offer and the $7.8-billion valuation via the startup's latest funding.